How to Balance Accounts Payable and Receivable

How to Balance Accounts Payable and Receivable Today’s business environment when enterprises are at a tight-edged competition, the need to do more with less has become the highest thought of strategies. Each business aims at yielding maximum ROI with the least minimum investment (accounts payable) they can do. Yet, as much as businesses want to balance their accounts payable and receivable as efficiently as possible, managing finances and cash flow can be one of the biggest headaches within companies and businesses globally.

1) Leverage Technology The best way to reduce accounts payable is through better management of your payment terms. It’s difficult—if not impossible—to control an invoice if you don’t have a specific timeframe in which it should be paid by a vendor or

customer. Using cloud-based invoicing software, you can create automated payment reminders, enforce a tighter timeline on delinquent invoices, and also send real-time updates of your account balances.

2) Keep Proper Records Keep accurate records of your accounts payable and receivable. You can set up a single spreadsheet to do so, with different tabs for each type of expense. Be sure to note down who will be reimbursing you for what, when they are expecting it back, whether or not you have already invoiced them, etc. Keeping all your records in one place means that there’s less likelihood of mistakes— and less work for you later on when you come time to pay everyone off!

3) Know Your Customers To succeed in any business, you must get to know your customers. You need to understand what they expect from you, how often they want that service, and their preferred methods of communication. For example, if someone loves interacting with your company on Facebook and Twitter but hates phone calls and e-mails, then your communication strategy must include social media channels. If your customer is constantly moving across time zones, you’ll have to change up your call center’s hours or offer self-service options for account management. The more familiar you are with your target audience, the better positioned you will be to improve services—and maximize profitability.

4) Get Paid on Time If you’re a business owner, then it is your responsibility to ensure that all accounts payable (i.e., invoices for services and goods) are paid on time or before their due date. There’s a small window of opportunity in which you can take advantage of – particularly if your suppliers offer 0% financing options – but if you can’t manage your cash flow effectively, then paying late will negatively impact your bottom line. That said, pay attention to how often you are writing off expenses as bad debt; some businesses mistakenly do so too often...and end up giving money away unnecessarily. Also be sure to think

strategically about where your inventory is stored; avoid costly supply chain disruptions by storing goods close to your main customers.

CONCLUSION Balancing accounts payable and receivable is necessary for any business. It can be challenging, but there are steps you can take to make it easier, especially when using good accounting practices. By making regular payments of accounts payable, your business will have enough money available for use in future growth opportunities while avoiding hefty late payment fees. Make sure you are receiving sufficient payment from customers in order to minimize your reliance on accounts receivable financing.

SOURCE: Miraculous Accounts Payable(AP) Process Improvement Ideas